No-Wynn situation but James Packer still tipped to sell Crown

James Packer’s Crown Resorts is still in play.

James Packer’s Australian-listed casino empire Crown Resorts started the week readying its board to consider an offer from Las Vegas Wynn Resorts but ends it without a bid and a clear signal to potential predators it is now on the hunt for a suitor.

To imagine just over five years ago, when Crown was awarded a licence to develop a $2.2 billion “VIP-restricted” casino in Sydney, that before it opened its doors it could be in the hands of foreign owners, would have been laughable. Mr Packer had long talked of his dream to develop a Sydney casino, which when it opens in 2021 is set to become Crown’s flagship Australian asset, ahead of Melbourne and Perth.

But now the billionaire — who stepped down from the Crown board last year citing mental health reasons — wants out and a casino empire that once had an expanding international strategy now has a strategy to sell.

Crown was a market darling, hailed among investors for its diversified strategy that saw it enjoy assets in Australia, Macau and London, with plans to build in Las Vegas and talk of applying for a Japanese casino licence.

But that all started to unravel as its VIP pitch to its high-end Chinese clients went bust in 2016,when 19 of its staff were detained in China for gambling-related offences. Following those arrests, Crown sold out of its interests in Macau, ending its joint venture with what was then known as Melco Crown.

The casino company then announced in December 2017 that several transactions were under way to reduce its exposure to international assets and non-casino interests. The $700 million asset sales included its Las Vegas land, purchased in 2014. The strategy to localise the casino’s focus might have been needed in response to the fallout from the China arrests, but it also narrowed Crown’s reliance on Australian assets that have had mixed results.

Crown Resorts reported a fall in its VIP turnover at its half-year result in February, flagging that while it had a “reasonable” number of visitors from China, their spend was down.

The drop-off was most evident at the Perth casino. The company’s half-year financial results revealed earnings there were down 8.6 per cent at $117.6m, while revenue was down 2.3 per cent at $417.7m. The revenue from its VIP business in Perth was down 18.5 per cent at $2.6bn.

Industry insiders have said the Wynn offer was one the board would have seriously considered as it was clear its major shareholder, Mr Packer, was likely to be a willing seller at the price mentioned. The $10bn cash-and-scrip deal had an implied value of $14.75 a share — a 26 per cent premium to Crown’s share price before the bid was announced.

Unfortunately for Crown’s board, deal talks were leaked and the suitor got spooked. But analysts are convinced Crown is in play and a deal will be done.